Tax Seminar #3 – December 3 2012
Workbook - Zicklin School of Business
Workbook - Zicklin School of Business
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If you do not have sufficient cash to pay for your offer, you may need to consider<br />
borrowing money from a bank, friends, and/or family. Other options may include<br />
borrowing against or selling other assets. NOTE: If retirement savings from an<br />
IRA or 401k plan are cashed out, there will be future tax liabilities owed as a<br />
result. Contact the IRS or your tax advisor before taking this action.<br />
Future tax obligations<br />
If your offer is accepted, you must continue to file and pay your tax obligations<br />
that become due in the future. If you fail to file and pay any tax obligations that<br />
become due within the five years after your offer is accepted, your offer may<br />
be defaulted. If your offer is defaulted, all compromised tax debts, including<br />
penalties and interest, will be reinstated.<br />
HOW TO APPLY<br />
Application process<br />
The application involves sending:<br />
• Form 656 (Offer in Compromise)<br />
• Completed Form 433-A (OIC), Collection Information Statement for Wages<br />
Earners and Self-Employed Individuals, if applicable<br />
• Completed Form 433-B(OIC), Collection Information Statement for Businesses,<br />
if applicable<br />
• $150 application fee, unless you meet low income certification<br />
• Initial offer payment, unless you meet low income certification<br />
If you and your spouse owe<br />
joint and separate tax debts<br />
If you have joint tax debt(s) with your spouse and also have an individual tax<br />
debt(s), you and your spouse will send in one Form 656 with all of the joint tax<br />
debt(s) and a second Form 656 with your individual tax debt(s), for a total of two<br />
Forms 656.<br />
If you and your spouse have joint tax debt(s) and you are also each responsible<br />
for an individual tax debt(s), you will each need to send in a separate Form 656.<br />
You will complete one Form 656 for yourself listing all your joint and separate<br />
tax debts and your spouse will complete one Form 656 listing all his or her joint<br />
and individual tax debts, for a total of two Forms 656.<br />
If you and your spouse/ex-spouse have a joint tax debt and your spouse/<br />
ex-spouse does not want to submit a Form 656, you on your own may submit a<br />
Form 656 to compromise your responsibility for the joint debt.<br />
Each Form 656 will require the $150 application fee and initial down payment<br />
unless your household meets the Low Income Certification guidelines (See<br />
page 2 of Form 656, Offer in Compromise).<br />
COMPLETING THE APPLICATION PACKAGE<br />
Step 1 <strong>–</strong> Gather your information<br />
To calculate an offer amount, you will need to gather information about your<br />
financial situation, including cash, investments, available credit, assets, income,<br />
and debt.<br />
You will also need to gather information about your average gross monthly<br />
household income and expenses. The entire household includes spouse,<br />
significant other, children, and others that reside in the household. This is<br />
necessary for the IRS to accurately evaluate your offer. In general, the IRS<br />
will not accept expenses for tuition for private schools, college expenses,<br />
charitable contributions, and other unsecured debt payments as part of<br />
the expenses calculation.<br />
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